Economic Dart-Throwing a Tough Business These
Days

Once again, Friday, the analysts called for 150,000 new
positions to be added while the US Department of Labor
reported that only 112,000 had actually been created
(See
Economy Tacks On 112,000 January Jobs
). Further, the economists predicted a steady unemployment
rate at 5.7%; the rate actually ticked down to 5.6% in
January.
In fact, according to a Reuters report,
economists’ forecasts have missed
actual
payroll figures by an average of 77,000 jobs since October
2003.

Normally, economists use other indicators and
survey
results
, such as the unemployment insurance rate and the
Institute for Supply Management’s (ISM) business
activity indexes, as they gaze into their crystal
balls.But the high level of productivity gains in the
past year
have
made this method of forecasting rather unsuccessful. As
firms exploit technology put in place during the boom
years
and outsource for cheaper labor, they can churn out more
without expanding staff.

Economists still hesitate to
say
that hiring will accelerate this year, even though a
report
showed
on Thursday that non-farm worker output per hour slowed
to
a 2.7% annual rate in the fourth quarter after the
third
quarter’s rate of 9.5%.

Being a payroll growth prognosticator also doesn’t
promise to get much easier in coming months, the
economists say. The drop in the unemployment rate to 5.7%
last month
from
6.2% in September 2003 is primarily due to discouraged
jobless
people
leaving the workforce, said Mary Ann Hurley, vice
president
of fixed-income trading at D.A. Davidson & Co. in
Seattle, Washington.

If the economy can continue adding jobs, the
unemployment
rate, which is determined from a different survey
from
payrolls, may rise as people come back into the labor
market, shesaid.That, potentially, could make the relationship
between payroll
growth
and the unemployment rate more unpredictable.